Technical indicators (e.g. moving averages) are mathematical calculations that are used on graphical charts, to display a market's trading information (e.g. the recent price movement) in a different manner. Indicators usually have several settings that can be configured by the trader to modify the way that the indicators are displayed (e.g. the number of candlesticks that are used in the indicator's calculation, etc.). One of the available, but least often modified settings, is the indicator's input data, for which there are usually several choices, one of which (and often the default of which) is the close.
The Close, or the Last
The close (sometimes known as the last), is the most recent price that was traded at during the time frame (e.g. a ten minute candlestick might have a close of 76).
The calculation of the close is essentially non existant, as it is as follows:
- Close = Close
For example, if a ten minute candlestick has a final price of 76, then the close, would be calculated as follows:
- Close = 76
Indicator Input Data
The default settings for many indicators use the close (or the last) of the time frame as the input data, and using the close is perfectly acceptable, but using one of the other choices (e.g. the average of the high, low, and close) as the input data, can display the indicator quite differently from the default settings.
The close is the final price that was traded at during the time frame, and therefore disregards all of the previous trading information for the time frame (e.g. the range of the time frame, etc.), and only considers the most recent trading information (i.e. the last price of the time frame) as being relevant (which may or may not be a good idea depending upon the indicator).
Either the close of the time frame, or one of the averages of the time frame (e.g. the average of the high, low, and close), can be used as an indicator's input data (i.e. both are equally correct), but it is useful to know the difference, because it can explain why two seemingly identical indicators are being displayed differently.
